2013-Illinois-Farmland-Values-Lease-Trends-Full

Report
2013
Illinois Farmland Values
& Lease Trends
Dale E. Aupperle, AFM, ARA
General Chairman
Gary Schnitkey, Ph.D.
Head – Survey Group
2013
Illinois Farmland Values
& Lease Trends
▼
18th Annual Report
▼
Covers Calendar Year 2012
▼
Lots of Farm Real Estate Transactions
▼
Updates on Rents & Leasing Trends
▼
A Team of Over 70 Professionals
- Professional Farm Managers
- Accredited & State Certified Appraisers
- Licensed Farmland Brokers
All Sharing Real World Experiences!
Contributing Organizations
Illinois Society of Professional
Farm Managers and Rural Appraisers
University of Illinois College of ACES
Illinois Farm & Land Chapter
of the REALTORS Land Institute
It Takes a Team of Professionals
General Chair
Dale Aupperle, AFM, ARA
Head – Survey Group
Gary Schnitkey, Ph.D.
Regional Data Group
Donald K. Cochran, ARA
Regional Data Group
Bruce Sherrick, Ph.D.
Heartland Ag Group, Ltd.
1401 Koester Drive, Ste. 100
Forsyth, IL 62535
(217) 876-7700
University of Illinois
300A Mumford Hall
1301 W. Gregory Drive
Urbana, IL 61801
(217) 244-9595
Cochran Ag Services
2453 East 700th Avenue
Wheeler, IL 62479
(618) 783-8383
University of Illinois
College of ACES
1301 W. Gregory Drive
Urbana, IL 61801
(217) 244-2637
Regional Data Group
Charles Knudson, ARA, RPRA
Advertising Group
Jonathan Norvell, Ph.D., AFM
Land Values Conference
Tim Harris, AFM
Land Values Conference
Winnie Stortzum, ARA
1st Farm Credit Services
2005 Jacobssen Drive, Ste. C
Normal, IL 61761
(309) 268-0286
University of Illinois
506 S. Wright Street
Urbana, IL 61801
(217) 244-6352
Capital Ag Property Services
22263 1365 N. Avenue
Princeton, IL 61356
(815) 875-7418
Farmers National Co.
109 E. Main Street
Arcola, IL 61910
(217) 268-4434
It Takes a Team of Professionals
Region 1
Region 2
Region 2
Douglas Deininger, ALC
David Dinderman
Todd Slock
Capital Ag Property Services
25846 Meadowland Circle
Plainfield, IL 60585
(630) 258-4801
1st Farm Credit Services
705 E. South Street
Freeport, IL 61032
(815) 235-3171
1st Farm Credit Services
3184 North State Route 23
Ottawa, IL 61350
(815) 433-1780
Region 3
Region 4
Region 5
Herbert Meyer, ARA
David E. Klein, AFM, ALC
Mac Boyd, ARA
Soy Capital Ag Services
#6 Heartland Dr., Ste. A
Bloomington, IL 61702
(309) 665-0961
Farmer National Co.
109 East Main Street
Arcola, IL 61910
(217) 268-4434
1st
Farm Credit Services
PO Box 70
Edwards, IL 61528
(309) 676-0069
It Takes a Team of Professionals
Region 6
Region 7
Dean G. Kyburz
Thomas Toohill, AFM
Busey Ag Services
130 North Main Street
Decatur, IL 62523
(217) 425-8290
Soy Capital Ag Services
3151 Greenhead Drive, Ste. A
Springfield, IL 62707
(217) 547-2885
Region 8
Region 9
Region 10
Dale Kellermann, AFM
David M. Ragan
Phil Eberle
Hickory Point Bank & Trust
1400 S. Lincoln Ave., Ste. G
O’Fallon, IL 62269
(618) 622-9490
Farm Credit Services of Illinois
1506 E. Lafayette Ave.
Effingham, IL 62401
(217) 342-6640
112 N. Lark Lane
Carbondale, IL 62901
(618) 457-0574
About This 2013 Booklet:
▼
Our First Full Color Presentation
(Thanks Carroll Merry)
▼
Presented by 10 Regions
- Farmland Sales Data
▪ Excellent Productive Tracts
▪ Good Productive Tracts
▪ Average Productive Tracts
▪ Fair Productive Tracts
▪ Recreational Tracts
▪ Transitional Tracts
-Lease Trends & Rental Rates
▼
Our Sponsors & Advertisers
- A good place to find a professional!
▼
Special Articles
- Agricultural Price Prospects
- Expected Changes to Farm Programs
in Next Farm Bill
- Continuing Increase in Farmland
Prices in 2012
- The Illinois Farmland Market: Trends
in Farmland Turnover and Value
2013
Illinois Farmland Values
& Lease Trends
Understanding Our Farmland Categories
Using the Productivity Index from the University of
Illinois (Bulletin 811).
Excellent Productivity – 147 to 133
Good Productivity – 132 to 117
Average Productivity – 116 to 100
Fair Productivity – Less than 100
A New Report Feature
We have added a chart that tracks the value of each category
of land over time.
Region 6 Land Values Summary Chart: 2001-2012
Regional Data Group
Bruce Sherrick, Ph.D.
University of Illinois
College of ACES
1301 W. Gregory Drive
Urbana, IL 61801
(217) 244-2637
Thanks - - Dr. Sherrick
2012 – Results at a Glance
Forces impacting agriculture were quite volatile in 2012 - but the farmland market never blinked - - continuing its
uptrend!
Land
Category
Mid Range
2012 Change
Excellent
+21%
Third year of double digit increases (totaling
65% in three years. Everyone’s favorite.
Good
+17%
Strong market activity but Class I soils drew
the premium.
Average
+16%
These buyers were likely to be neighbors in the
local community.
Fair
+17%
Popular category as land mix attracts
residential, recreational and non-farm use.
Recreational
+5%
(maybe)
Transitional
Flat
Comments
Poor economy limits discretionary income and
keeps lid on prices.
Limited activity. Current farmland values
nearly equal to development land values!
All Categories of Farmland
The Great State of Illinois
Here is the most comprehensive look you will get at 2012 statewide
Illinois farmland values:
Excellent
Good
Average
Fair
Recreational
Transitional
Region 1
$10,800
$9,300
$7,300
--
$5,700
$15,000
Region 2
$11,000
$9,300
$6,700
$4,600
$3,640
--
Region 3
$12,000
$8,500
$5,200
--
$2,925
--
Region 4
$12,700
$9,100
$6,900
--
$4,700
--
Region 5
$10,000
$8,100
$5,700
--
$3,800
$9,350
Region 6
$11,800
$10,100
$8,900
$5,800
$3,575
$13,000
Region 7
$11,600
$10,600
$6,000
$3,000
$2,450
$10,000
Region 8
--
$8,800
$7,800
$10,900
$3,500
$9,600
Region 9
--
--
$7,000
$4,800
$2,950
$9,575
Region 10
--
$9,400
$6,200
$3,500
$2,500
--
$11,400
$9,200
$6,700
$5,400
$3,575
$11,000
Average
Averages are dangerous - - but they gives us a snapshot of
each category (for comparison).
Excellent Quality Farmland
Mid Range
Land Value
Comments
Region 1
$10,800
After harvest and crop insurance checks - - land
values quickly increased.
Region 2
$11,000
Majority of farms purchased by local farmers
who have increased purchasing power.
Region 3
$12,000
Prime land has shown strength at auction. Two
noticeable selling seasons - - (spring and fall).
Region 4
$12,700
November sales exceed $15,000 at public
auction! Prices escalated at year-end.
Region 5
$10,000
Landowners hesitant to put farms on the market
because of alternative investment opportunities.
Region 6
$11,800
Return on investment remains very strong for
farmland.
Region 7
$11,600
Principal buyers are farmers and investors with
close ties to aggressive farmers.
Region 8
--
Region 9
--
Region 10
-$11,400
(average)
Good Quality Farmland
Mid Range
Land Value
Comments
Region 1
$9,300
Purchasers focused on improving fertility and drainage
to enhance these farm investments.
Region 2
$9,300
A majority of purchasers were by local farmers - value shot up in the last quarter.
Region 3
$8,500
Average soils take more time and inputs to farm and
have more irregularly shaped fields.
Region 4
$9,100
These soils respond well to high management. Wider
ranges of values is available. High supply in 2012.
Region 5
$8,100
Investors buying these properties in anticipation of
higher cash returns on their investment dollars.
Farmers are aggressive buyers.
Region 6
$10,100
Significant range in size and quality of land sold in this
category.
Region 7
$10,600
Gap between good and excellent quality has widened
due to greater demand of Class I soils.
Region 8
$8,800
Region 9
--
Region 10
$9,400
Limited soils above 133 productivity index.
Most soils are located along the Wabash River - limited volume.
Less than 10% of land in this category. Sales are due to
death or retirement. Local purchasers.
Recreational Land
Mid Range
Land Value
Comments
Region 1
$5,700
Poor Economy - - Stagnate Market
Region 2
$3,640
Supply (for sale) Exceeds Demand – Prices
Down 19%
Region 3
$2,925
Soft Market – Auction Sales show Weakness
Region 4
$4,700
Increase in number of tracts sold. Soft Market.
20 to 60 acre tract sizes.
Region 5
$3,800
Demand Slow – No Money - - Supply Low
Region 6
$3,575
Small Number of Sales
Region 7
$2,450
Premium for Timber over odd shaped tillable
Region 8
$3,500
Usually wooded tracts (no income) – Good
demand from St. Louis area.
Region 9
$2,950
Lots of small, irregular fields
Region 10
$2,500
Unchanged Value. Majority of sales by
realtors for deer hunting.
Transitional Land
Mid Range
Land Value
Comments
Bank Owned Sales Ending
Region 1
$13,466
Region 2
N/A
Region 3
N/A
Region 4
$22,500
Region 5
$9,350
Region 6
$13,000
Region 7
$10,000
Region 8
$9,600
Not much added value (down sharply from
$25,000 to $40,000 per acre at peak)
Region 9
$9,575
Limited Activity
Region 10
N/A
A True Commercial Sale
Modest Demand around Champaign and
Danville
Slight increase in Demand (Decatur)
Note – If the tracts were not being purchased for immediate
development - - most only retained ag value.
River Bottom Land
Here is a special focus on River Bottom land sales:
Mid Range
Land Value
Comments
Region 3
$8,300
Farms are in both Illinois and Mississippi
River Bottoms. Prices influenced by drainage
and location in the bottoms.
Region 9
$4,400
Prices vary greatly depending on the flood
protection.
Here is the good stuff - First hand observations from across the great state of Illinois!
▼
Grain Prices – Mother Nature slashed corn and soybean
yields in 2012 which resulted in skyrocketing grain prices.
$7.00 to $8.00 per bushel corn and $15.00 to $18.00 per
bushel soybeans were significant and offset much of the
yield drop.
▼
Net Farm Income – Farmland truly is what it earns! Net
farm income across Illinois was stable to increasing this
past year due to higher commodity prices and the payouts
from crop insurance programs.
Here is the good stuff - - (continued)
▼
Drought Conditions – The Great Drought of 2012 resulted
in some of the largest corn and soybean yield reductions our
members had ever witnessed. On an average corn yields
were down nearly 50% and soybeans were reduced by onethird.
▼
Crop Insurance – These insurance product were available to
all producers and until this year were viewed as an
expensive way to manage your risk. Not anymore! The
overall revenue protection it provided Illinois farmers and
landowners was amazing. Many net farm incomes were
stable to rising in spite of the drought.
Here is the good stuff - - (continued)
▼
Tile Drainage – On most Illinois farms - - drainage is
critically important. Farmers took advantage of their profits
and expanded their farm drainage through an amazing
amount of tiling systems. Millions of feet of tile have gone
in across Illinois.
▼
Interest Rates – Interest rates on operating loans and farm
mortgages are at the lowest ebb in anyone’s memory.
Savings that result from “cheap money” allow interested
landowners to bid more for farmland or farm operators to
pay more for cash rent. Agricultural participants worry that
our next move in interest rates is higher.
Here is the good stuff - - (continued)
▼
Auction Sales – An auction is an exercise in price discovery.
There has been a sharp increase in the number of auction
sales as farmland values continue to rise. Those auction
results are instant knowledge to a wide variety of
participants and observers in the land market.
▼
Capital Gains Taxes – The threat of higher capital gains
taxes caused a surge in the volume of land being offered for
sale at year-end 2012. Most sellers wanted to avoid the
additional tax and rushed to close their transactions prior to
year-end.
Here is the good stuff - - (continued)
▼
Inflation – Most participants in Illinois agriculture view our
government’s deficit spending as a formula for significant
future inflation. Farmland is a hedge against that possibility
- - attracting widespread buyers to Illinois farmland.
▼
Mineral Rights – Illinois is experiencing an energy boom.
Farmland owners across the state are becoming sensitive to
the prospect of coal, oil natural gas under their properties
which drives the value of the property and income from it.
Here is the good stuff - - (continued)
▼
Wind Farms – An uncertain environment for wind energy
had caused many projects to be placed on hold throughout
2012. There was a flurry of activity at the end of the year
when legislation extended the tax benefits to the wind energy
participants for one year.
▼
Estate Taxes – Rising farmland values are putting
significant pressure on the estate tax exemption and are a
major concern of land owners across the entire state of
Illinois.
Here is the good stuff - - (continued)
▼
USDA Programs – There is little need for price supporting
programs in this environment and the farming community is
not focused on the safety net at this time. There is a general
understanding that conservation funding will also be limited
by funds available.
A Quick Look Forward
▼
Influencing factors to watch for:
- Interest Rates
- Value of the Dollar
- Alternate Investments
- Weather and Yields
- Commodity Prices
- Crop Insurance
▼
Our ISPFMRA Membership Thoughts:
- Look for rising values in 2013
- Next 5 year trend is positive
- Prefer a return to normal (5% - 6%) annual increases
▼
Late Breaking Farmland Sales – Wow!
- Champaign Co. $15,375 - Shelby Co.
- Christian Co.
$15,800 - McLean Co.
$14,500
$14,550
One Last Thought:
“If you eat - - then you
are a part of
Agriculture.”
Leland Glazebrook
Farm Broadcaster
WDZQ Radio
Land and Lease Survey
•
Surveys of individuals knowledgeable about the
farmland and farmland rental markets
•
Land Survey (page 86)
• Increases in 2012
• Optimism for 2013
•
Lease Survey (page 89)
• Cash rent increases in 2013
Farmland Prices
Land Quality
Jan 1, 2012
Dec 31, 2012
Change
Excellent
$10,510
$12,670
21%
Good
$8,980
$10,500
17%
Fair
$7,560
$8,770
16%
Poor
$5,980
$6,980
17%
Percent of Members Expecting Farmland
Price Increases in 2013
Increase more than 5%
Increase 1 to 5%
State the same
Response
Decrease 1 to 5%
2013
2012
Decrease more than 5%
0
10
20
30
Percent
40
50
Chance of a 20% Price Decline
Expected Yearly Increase in Land Prices,
Next Five Years
Increae more than 10%
Increase 5 to 10%
Increase 0 to 5%
Decrease 0% and 5%
Decrease 5% and 10%
Decrease more than 10%
0
10
20
30
40
Percent of Respondents
50
60
Buyers and Sellers
• Buyers: Local farmers 70%, Local investors 6%,
Non-local investors 14%
• Sellers: Estate sales 58%, Individual investors,
15%, Retired farmers 14%
• Reasons for Selling: Settle estates 59%,
Received a good price 26%
Method of Selling Farmland
Sealed bid
Multi-parcel auction
Public auction
Private treaty
8%
13%
44%
35%
Change in Outside Interest
Change in Volume, Last Half 2010 to 2011
Incomes from Alternative Lease Types, 2012
Lease type
Traditional crop share
Excellent
Land Quality
Good
Average
Fair
------------------ $ per acre --------------------345
291
252
198
Cash rent
348
294
242
194
Custom farming
490
401
324
240
2013 Cash Rents, Professional Farm Managers
Category
High 1/3
Excellent
Land Quality
Good Average
Fair
----------------- $ per acre ---------------------447
385
324
265
Mid 1/3
396
339
285
235
Low 1/3
320
274
221
179
Historic Cash Rents, Midpoints
Year
2007
2008
2009
2010
2011
2012
2013
Excellent
183
241
267
268
319
379
396
Land Quality
Good Average
$ per acre
164
207
221
231
271
331
339
144
172
187
189
220
270
285
Fair
120
138
155
156
183
218
235
Lease Arrangement Use
Traditional crop share
Crop share with supp. Rent
Crop share with other modifications
Traditional cash rent
Variable cash rent
Custom farming
0
10
20
Percent
30
40
Cash Rent Expectations for 2014
• Most expect cash rents to remain the same in 2014
• If yields are normal, $5.00 corn price, $11 soybean
price
–
–
–
–
40% expect cash rents to decrease $10 per acre or more
30% expect cash rents to decrease $0 to 10 per acre
27% expect cash rents remain the same
3% expect cash rents to increase
Thank You and Questions

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